Is Congress Actually Going To Do Something Right?
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I just read a post tonight that absolutely floored me. Could congress actually be doing something right for a change? I can hardly believe it. I’m waiting for the other shoe to fall and looking under the bed for the “gotcha.” This all concerns the Fair Tax Act of 2009, H.R. 25 and S. 296. While I see that H.R. 25 is listed as dead in one place, it is alive in another.
An analysis of the Fair Tax Act has just come out. The bill itself is a whopper, as in huge. But the gist of it is that all the taxes the IRS currently collects, estate, income, inheritance, social security, etc. would be gone once and for all. The 16th Amendment would be repealed, and all those tax agents would be forced to transfer or be out of a job. The article had my absolute attention. No more income tax? No more paying for Social Security? But all programs are paid for? Am I dreaming?
The economy would rebound as every single person out there found more money in their wallets. Yes, we would still have a flat tax to deal with each time we bought something but far reduced from the current state of affairs where we pay taxes on everything and anything.
Corporations would also benefit. Without corporate taxes, prices would fall while exports grow. This would create more opportunity for business to grow, higher wages for workers, more exports and deflation. Just what our economy needs right now.
Could it be true? Could Congress actually get something right for a change? Will the illegal and questionable 16th Amendment be repealed? Will the IRS actually be a thing of the past? I find it a bit unbelievable. Congress hasn’t done anything for We the People in so long I can’t remember when the last time was.
How to Castrate the IRS
by Lance Voorhees
June 11, 2010
Washington power brokers are on the move to repeal the 16th Amendment and revoke Congress’ power to collect income tax. If successful, the IRS would be castrated and most agents would have to apply for a transfer or hit the pavement.
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The Fair Tax Act before Congress is designed to fully fund the federal government, including Social Security, Medicare, etc. Like invisible ink, all federal deductions from your paycheck would disappear. Capital gains, self-employment, estate, gift and corporate taxes would fall by the wayside.
But would congress actually do something like this? Would they actually put Citizens, the economy, and Business first for a change? I have a really hard time seeing this happening. Call me cynical but congress’ track history hasn’t been noble lately. My faith in congress is about zero on a scale of 1 to 10 with 10 being exceptional performance. As I’ve been watching the bills coming before congress lately, (Washington Watch ), most have increased taxes on Citizens some by thousands of dollars per year.
I’ve heard some pretty nasty things about the IRS tax agents. I don’t think there is a Citizen out there who would miss them one bit. But I have also personally known some of those who input the tax forms for the IRS. People just like you and I who have a job to do and are collecting their pay for it. Those people would need jobs. Just like the rest of us they struggle to feed their families in this economy. I don’t know how this would affect them but I think they would have to find other work.
Rebuilding our economy right now would boost moral in this country immensely. Some of the rage the Citizens are feeling might just bleed off. The frustration has been fueled by the struggle just to keep our heads above water, keep our families together, a roof over our heads, the invasion of the united States and other issues. To have the tax liabilities lowered and flattened would help everyone to breath easier and feel a bit more confident. But would congress actually do that?
It sounds like a much needed saving of our economy. But how can we know if congress will actually do something right for a change. This bill, H.R. 25 and S.296. are monsters. H.R. 25 has been sitting in committee for quite a while since Jan. 6, 2009. It has been tabled by the House Committee on Ways and Means . Usually when a bill is in committee this long it dies. You can see the bill waiting if you click on the link above.
About.com wrote a review of the Fair Tax Act. Here is what they had to say:
By Kimberly Amadeo, About.com Guide
A group known as Americans for Fair Taxation developed the Fair Tax Act of 2003 which would abolish all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes. It would replace them with a federal retail sales tax of 23% to be administered by existing state sales tax authorities. The sales tax would not apply to imports, goods used by businesses to produce other goods, or used goods.
The Fair Tax would require the repeal of the 16th Amendment. The IRS would be disbanded and defunded.
Right now, that just doesn’t sound too bad. Of course that is IF it happens. I’m not about to hold my breath or anything at this point. As I stated before my faith in congress just doesn’t exist right now.
Some interesting things happen with this Fair Tax Act. In order for the poor, elderly, and low income families to be able to pay the 23% flat tax, a check is paid to each family at the beginning of the month. For a family of four that would amount to $ 525.00 per month. That adds up to $6,297 per year. Imagine getting paid to spend?
If you live a lavish lifestyle you will be paying more than someone who lives frugally.
Is there a down side? Yes there is. For those not making money from a job the tax burden will be higher. Those like the elderly who have paid into social security and now
collect benefits will pay a higher tax after spending all those years paying for their retirement. That isn’t fair, but if we change things it has to start somewhere. The same goes for those who are disabled.
Would the IRS actually go by the wayside? Yes and no. An agency would still need to be in place to send out the checks and to monitor business accounts. No cheating will be allowed here either.
But is there a dangerous side to all this? Could be. According to the About.com article the flat tax could go as high as 67% if there is a lot of cheating going on or if the government doesn’t tax food or medical. I cannot say what would happen or how the government would deal with it. Perhaps that is what is taking this bill so long to work its way through the committee.
State’s would also have to make up for the income tax they won’t be collecting if there is no federal taxes. The About.com article states it would have to add to the flat tax somewhere along the line. So a 23% flat tax could go up another 10%. This could be a very slippery slope to try to walk.
Differing Points of View
There are experts in the financial industry that disagree with each other and with the Fair Tax Act subject. I do not profess to be able to offer an opinion like theirs. I’ll bring up two here.
William G. Gale has quite the distinguished history in economics. He is co-founder of Urban-Brookings Tax Policy Center, and the Arjay and Frances Miller Chair in Federal Economic Policy in the Economic Studies Program at Brookings, is an expert on tax policy, fiscal issues, pensions, and saving behavior. I’ve often wondered why politicians are in charge of financial matters when they are far too much like the rest of us. Too often they do not listen to those who understand the situation better. Why have experts if you aren’t going to use them? Anyway, here is a very short synopsis of what Mr. Gale thinks about the Fair Tax Act.
The National Retail Sales Tax: What Would the Rate Have To Be?
Second, H.R. 25, a recent legislative proposal, would replace the existing income, corporate, payroll, and estate and gift taxes with a 23 percent tax-inclusive (30 percent tax-exclusive) sales tax on almost all private consumption, a significant portion of household interest payments, and all federal, state, and local government noneducation purchases, and would provide payments to offset taxes on consumption to households up to the poverty line. Even if there were no avoidance and no evasion, however, the required tax rate for that proposal over the next 10 years would be 31 percent tax-inclusive (44 percent tax-exclusive). If the tax rate were set at 23 percent (tax-inclusive), the revenue loss would exceed $7 trillion over the next decade relative to current law.
Third, with plausible allowances for avoidance, evasion, and tax exemptions for some private consumption and some state and local purchases, both the required tax rates and the revenue loss from imposing a sales tax at a 23 percent tax-inclusive rate climb significantly higher.
That all sounds pretty ominous. And this is only a small portion of the evaluation you can find by clicking on the title link above. The full report is in PDF format there.
I was going to include a different article here, one that rebutted Mr. Gale’s, but on closer review of the article it came off more as a personal attack and so I felt it wasn’t appropriate even if the evidence it brought out was good. So I decided to turn to the FairTax.org site and see if they had any research to back up their push for revamping our tax system. I found an article by a man with every bit as impressive a background as Mr. Gates has.
LAURENCE J. KOTLIKOFF, PH.D. Professor of Economics at Boston University, fellow of the American Academy of Arts and Sciences, and former senior economist, President’s Council of Economic Advisers. Kotlikoff has published extensively in the field of public finance and tax reform including papers on the FairTax, which are targeted to lay as well as professional audiences.
WHY DEMOCRATS SHOULD LOVE THE FAIRTAX
The Boston Globe, February 24, 2008
Our current tax system is regressive because none of the corpus – the principal — of their wealth of the rich, including our more than 400 billionaires, is subjected to taxation. Instead they pay taxes only on the income earned on their wealth. But this income comes primarily as capital gains, which are taxed at only 15 percent. Furthermore, capital gains taxes are levied only when wealth holders realize their gains — when they sell their appreciated assets.
But the super rich don’t need to sell their gains. If they need cash – they can borrow using their appreciated assets as collateral. When they die, they can hand their heirs their appreciated assets with a step-up in basis, which wipes out prior capital gains. With the right estate planning, they can also avoid most estate and gift taxes. Unlike most of us, what the super wealthy and just plain wealthy pay in taxes is a matter of choice – their choice. When Warren Buffet says his tax rate is much lower than his secretary’s, he’s got it right.
Somehow I just don’t see the rich liking this plan much. We all know the rich are exceptionally good at hiding their assets, evading taxation, and being able to hire those skilled in making sure they don’t pay their fair share though tax loop-holes. I do not doubt that they will continue to work this angle even if this ACT takes place and our whole economy is revamped.
What we are doing now is not working. That is self evident by what has been done to our economy.
I am also still unsure just how much or adversely this will affect the very poor or homeless. For those who have paid into the system all their lives, how will this marked departure affect them? Will there be a way to compensate them for the money they have lost? How about their retirement plans? Still so many questions needing answers.Source: justmytruth.wordpress.com